There is a long list of life-changing events that will require your extra attention when it comes time to filing your taxes. Each change brings on a new challenge, and they can affect men as much as women. When it comes to divorce, however, especially where children are involved, the information below can be helpful to keep in mind.
1) Coordinate who gets the children as a tax deduction
As a general rule, the custodial parent is entitled to take the dependency exemption for their child. The custodial parent is the parent having custody for the greater part of the calendar year, and the one who provides more than half of the child’s support.
However, the noncustodial parent may be entitled to the deduction. This can happen when the custodial parent agrees to share the deduction, both parents provide more than half of the child’s support, or the child lives with the noncustodial parent for more than half the year.
2) File as head of the household if you are eligible
The primary difference between filing as a single person and filing as head of household is that head of household status means you have been unmarried at the end of the year or living apart from your spouse for more than six months.
You must also have paid more than 50 percent of all household expenses, have supported at least one dependent for a minimum of six months out of the year, and be a U.S. citizen. Single parents may be eligible for a substantial tax break by filing this way.
You also may also be able to claim head of household status during the absence of a college child if you are providing more than 50 percent support. Single parents who have no children but have cared for a dependent family member may qualify for head of household status as well.
3) Alimony and child support
Alimony, also known as spousal support, is deductible by the payer and must be claimed by the receiver as taxable income. Unlike alimony, child support isn’t tax-deductible for the payer and it isn’t considered income for the recipient. As a result, child support doesn’t need to be reported on your income tax return, whether you make or receive payments.
Take time to review
Life changes can have more of an impact on your taxes than you might think. Make sure to get up to speed on recent tax laws. And take the time to review your tax situation periodically; it could save you a lot of time and surprises when filing.
This information is general in nature and should not be construed as tax or legal advice. Neither Signator Investors. nor its Representatives may offer tax and/or legal advice. Please consult your tax and/or legal adviser for guidance on your particular situation.